Hot Takes

The OCC just took a big step toward creating a national fintech charter.

Such a charter is something we’ve been advocating for some time. In a speech on Tuesday, Comptroller of the Currency Thomas J. Curry didn’t say let on what the OCC was thinking about limited-purpose charters (say, for digital currency exchanges), but he did say that the agency would finalize an innovation framework this fall. More importantly, that same day the OCC issued a proposed regulation “setting forth a framework for placing uninsured national banks into receivership.” From the release:

While the OCC has not appointed a receiver for an uninsured national bank in many years, clarifying the framework, process, and authority promotes the orderly resolution of such institutions if required and contributes to the broader stability of the federal banking system.

“The OCC has a long history of working successfully to restore strength and viability to institutions that face difficulty,” Comptroller of the Currency Thomas J. Curry said. “In the event those efforts fail and receivership becomes necessary, a clear and efficient process of resolving failing uninsured national banks is in everyone’s best interest.”

The proposed rule would apply to all uninsured national banks regulated by the OCC. While the National Bank Act and Federal Deposit Insurance Act specify the Federal Deposit Insurance Corporation as receiver for insured banks and savings associations, the law grants the Comptroller broad authority to choose a receiver for uninsured national banks.

What’s notable about this is that any limited-purpose charter that would be granted to digital currency firms would not be federally insured. In the notice, the OCC specifically asked for comment on “the utility of the receivership structure in the proposed rule for receivership of a special purpose bank.” It’s a bit wonky, but with this proposed rulemaking the OCC may be setting the stage for creating the kind fintech charter that would benefit digital currency firms. It’s a great sign, and you can bet Coin Center will be filing comments in this proceeding.

As part of our work to keep cryptocurrency networks open, decentralized, and permissionless, Coin Center tracks the introduction and current status of federal legislation that mentions, or relates to, cryptocurrencies. During the first months of the 116th Congress, we have identified 11 such bills as having been introduced in either the House of Representatives or the Senate.

As a resource to those interested in public policy and the regulation of cryptocurrencies, we have decided to make our “Crypto Bills Tracker” publicly available. We will be periodically updating it as bills are introduced and move through the legislative process, and hope it will serve as a useful resource for the cryptocurrency community.

A few months ago LabCFTC, the division of the agency dealing with innovative financial products, put out a request for information to better understand the Ethereum network and ecosystem that has developed around it. We have submitted a formal comment explaining what Ethereum is and how it works relative to other public blockchain networks like Bitcoin. Issues covered include smart contracts, consensus mechanisms (current and planned), governance, etc.

The cryptocurrency policy briefing from Coin Center.

Earlier today, Coin Center hosted a briefing in Congress in conjunction with the Congressional Blockchain Caucus. We covered the basics of cryptocurrency, why it’s exciting, and went through some the policy issues the technology raises, including questions of scaling, privacy, consumer protection, and tax.

One of the things made uniquely possible by cryptocurrency is microtransactions--tiny transactions without a middleman. To visualize this concept, we used a lightning enabled candy dispenser. We were able to show the process of sending tiny amounts of bitcoin from our phones to the vending machine and watch it dispense candy in real time. The network fees were 1 satoshi per transaction.

Real time demonstrations like these are always better than simply describing a process. We are grateful to Swiss developer David Knezić for generously donating the dispenser to Coin Center.

The well-attended briefing was the first of many that the Congressional Blockchain Caucus plans to hold in 2019. We are excited to continue helping them and their colleagues better understand and appreciate this technology.

The result of this is that many cryptocurrency businesses are choosing to simply forgo doing business with customers in New York.

We are glad to see the New York legislature taking the step of creating a task force to better evaluate the cryptocurrency landscape and its own regulatory stance toward the technology, which is well overdue. As Assemblyman Clyde Vanel noted, “It has been nearly four years since the implementation of the BitLicense. In the cryptocurrency space and technology in general, a few months is equivalent to years.”

We look forward engaging with the task force on this important mission.

A bill that would clarify securities law for tokens and improve the tax treatment of cryptocurrencies was just introduced in Congress.

Today, Reps. Warren Davidson and Darren Soto introduced the Token Taxonomy Act, which includes several common-sense changes to federal law.

First, the bill would amend the definition of “security” in the Securities Act of 1933 and the Securities Exchange Act of 1934 to exclude decentralized cryptocurrencies such as Bitcoin, thereby making clear that such cryptocurrencies are not subject to the rules and regulations of the U.S. Securities and Exchange Commission. We have longargued that classifying decentralized cryptocurrencies as securities would be both impractical and harmful to innovation, a view that the SEC has, to its great credit, also recently taken. Although the SEC has put forth sensible guidance on this question, codifying that decentralized cryptocurrencies are not securities would mitigate any lingering uncertainty.

The bill would also make several changes to the tax treatment of cryptocurrencies. One such change that we have long argued for is a de minimis exemption for cryptocurrency transactions for goods and services. Today, if you buy a cup of coffee with bitcoins and the price of bitcoin has increased since you acquired it, you would have to calculate, report, and pay taxes on any capital gains that you realized as a result of the transaction, no matter how small they might be. The Token Taxonomy Act would create an exemption from this requirement for any gains under $600, similar to the de minimis exemption that foreign currency transactions enjoy today, which we think is a simple and fair way to avoid unfairly discouraging the use of cryptocurrency as a means of payment.

We are happy to see continued action from Congress to implement common-sense clarifications and adjustments to the regulatory treatment of cryptocurrencies. We are looking forward to continued engagement with policymakers on these issues to ensure that the fruits of cryptocurrency innovation are not lost to ill-considered policy.

It is great to see cryptocurrency industry participants increasingly work together to improve their standards and build an orderly cryptocurrency ecosystem. We are looking forward to working with both organizations.

Based in Washington, D.C., Coin Center is the leading non-profit research and advocacy center focused on the public policy issues facing cryptocurrency and decentralized computing technologies like Bitcoin and Ethereum. Our mission is to build a better understanding of these technologies and to promote a regulatory climate that preserves the freedom to innovate using permissionless blockchain technologies.